Nudge Theory – What drums do you dance to?

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Nudge Theory

A highly popular science book "Nudge: Improving Decisions About Health, Wealth and Happiness" (Thaler and Sunstein, 2008) is now ten years old. BBC Radio 4 programme "Nudge Nudge" investigates the growing influence of Nudge Theory in government and business (broadcast 8th July and 23rd October 2018).

Nudge holds that rather than making decisions on a rational basis, innate behaviours of human nature influence making choices; risk avoidance, unrealistic optimism and overestimating bad behavior in others; the list goes on. Insights into these behaviours can be used by nuanced influences to nudge people to make "better choices for themselves and society" as The Behavioural Insights Team say.

As early as 2010 No. 10 set up a small Nudge Unit headed up by David Halpern who is now CEO of the Behavioural Insights Team (BIT). BIT is co-owned by the government and now provides services to government departments and other countries around the world.

Nudge Theory Examples:

  • Removing the £ sign from menus makes people less price averse.
  • Paint a line on a railway platform and people stand further from the edge.
  • Job Centers find that rather than challenging people to say what they had done to find work over the past week asking them what they planned to do in the coming week resulted in more people coming of off benefits.
  • Auto enrollment in pension schemes with an option to opt out produces more personal pension engagement than opt in schemes.
  • A tax advice that carries a note that most people pay there tax on time results in prompter payments.

Nudge Wars - The dark side of nudge theory

The private sector is employing nudge tactics for their own ends. A bank may employ auto-enrollment to an optional overdraft protection program that provides for an overdraft albeit at very high interest rates. This may not have been clear at sign-up even if that choice was offered. Legislation is introduced to counteract presumed consent; the financial institution responds with an new nudge to encourage enrollment “do you want to lose the protection you have long enjoyed?”; addressing the behavioral insight of loss aversion.

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About the Author
John Jacob

John Jacob

Jake, as he is known to everyone except his mother, set out as a field biologist mostly collecting and identifying invertebrates on London parks and commons accompanied by Bruno the whippet. A career switch into IT and Jake was on a path through Systems Analyst with British Aerospace and BUPA to a Consultant role in the hectic environment of FX trading floors of UK and Swedish banks. Thereafter followed a spell as a freelance Consultant in FX systems and web design.